fiat --> gold --> bitcoins
bitcoins --> gold --> fiat
Any hard assets can and will eventually be seized by a government or two. It's happened many times before, even with creative schemes behind them.
While I'm still more or less convinced that a P2P exchange of BTC=>Fiat is not feasible
Then you're simply not looking hard enough.
There are ways of making a digital security worth exactly 1 dollar and backing it with some sort of value, even if that value is bitcoin. I'm working on one myself.
@btcluke
I want to start by saying I appreciate everyone who takes time to post thoughtful responses. So I will respond to your post stating I fully believe I can satisfy all of your requirements. So much so that I have posted another thread where I am looking to hire someone to help me and invest $20,000 or more in creating a working system based on my ideas. But, as a sanity check I am also offering a 10 BTC bounty to anyone who can convince me that the idea will not work and save me time and money.
Hi bytemaster,
I looked and looked at your proposal and quite honestly I can't do you justice on your request, because it's so off in a different direction from the exchange I have in my head.
There are a dozen things about it that ring alarm bells in my head, but they all could be something that can't work on my foundational system while they do work on yours... So if only I had the time and mental fortitude to cram your whole system into my head I'd be very tempted to go after your bounty... Sadly I'm just not up to the task right now.
I will say that the thing that stands out to me the most is your dollars don't sound very much like dollars to me. Will they always be worth exactly $1 USD to the enduser? Will the enduser understand that they are in fact supposed to take place of USD? If not, the whole system could crumble from being too confusing for laymen to use.
We need a distributed third-party.
We need to figure out a way to distribute escrow, and to keep the escrowers honest.
You're correct. I'm pretty sure I've worked that part out already, and I'm working out the details about it now.
Like with trading itself, I think 3rd parties should always be paid for their involvement, so this brings in a 3rd income-generating opportunity with my exchange.
Can you just keep escrowers honest based on a reputation system?
Not alone. It has to be one of multiple measures taken. Look at BTCJam, they use it effectively, but they also have the centralized system of arbitration to back it up. We've got to be really creative to duplicate those other measures in a decentralized environment.
3. Transact trades pretty much INSTANTANEOUSLY
Is this necessary for all trades though?
Currency trades, yes. Absolutely.
Otherwise you can't build accurate charting data, and without those charts, traders and arbitragers won't want anything to do with your software.
I have a 7th criterion to add:
7. It must not be assumed that the individual users have access to less information than the network as a whole.
As mentioned, the are numerous P2P exchange threads popping up. The ones that sound the most plausible on the surface are also the most flawed: That the network as a whole can somehow authorize things that individuals can't. This violates the laws of the universe...
I am not much of a coder at all, (just html) but I personally don't think I would have violated that criterion.
However, if the coders here feel that this problem will pop up again and again without this 7th criterion on the list, then I'm all for it.
CODERS: Please Yea or Nay phillipsjk's suggetion.I've got another one now... Let's assume other coders agree on 7, so this will be 8:
8. It must be easy enough for Laymen to understand. (The grandmother clause)
Basically, the ideal exchange should be easy enough for even your grandmother to make her first trade on. Therefore, we should not require extensive understanding of cryptography, code, cryptocurrencies, nor even economics to operate this software...
No abstract ideas required to understand the fiat safely, either! Grandma thinks she knows what $1 is, and no matter what your idea for a fiat replacement is, $1 worth of it had better STAY worth $1 over time, or the whole enterprise will leave a bad taste in her mouth... If not piss off governments even more.
Try to think of your enduser as a grandma who just learned what a bitcoin is and wants to buy one. If you can't make a software for that person, you're wasting all our time.